About Italy, there are serious questions that FT, and others, should not silence.

Sir, I refer to “Draghi plots €221bn rebuilding of Italy’s recession ravaged economy” Miles Johnson and Sam Fleming, and to “Europe’s future hinges on Italy’s recovery fund reforms”, Andrea Lorenzo Capusella, FT April 22, and to so many other articles that touch upon the issue of Italy’s future, in order to ask some direct questions.

Do you think Italy’s chances of a bright future lies more in the hands of Italy’s government and its bureaucrats, than in hands of e.g., Italian small businesses and entrepreneurs?

I ask this because, with current risk weighted bank capital requirements, regulators, like Mario Draghi a former chairman of the Financial Stability Board, arguably arguing Italy’s government represents less credit risk, do de facto also state it is more worthy of credit. I firmly reject such a notion.

Yes, Italy clearly shows a stagnant productivity, but could that be improved by in any way increasing its government revenues?

Italy, before Covid-19, showed figures around 150% of public debt to GDP and government spending of close to 50% of GDP. I am among the last to condone tax evasion… but if Italian had paid all their taxes… would its government represent a lower share of GDP spending, and do you believe its debt to GDP would be lower?

One final question: Sir, given how Italy is governed, excluding from it any illegal activities such as drug trafficking, where do you think it would be without its shadow eeconomy, its economia sommersa? A lot better? Hmm!

PS. As you know (but seemingly turn a blind eye to), Italy’s debt, even though it cannot print euros on its own, has, independent of credit ratings, been assigned by EU regulators, a 0% risk weight.

My tweet on why the world is becoming a much angrier place than what’s warranted by the usual factors.

Sir, Chris Giles writes “Britain is an angry place: furious about its politics, unsure of its place in the world and increasingly resigned to a grinding stagnation of living standards” “Anger and inequality make for a heady mix” March 1.

Giles analyzes the increasing discontent as a function of the economy, in terms of economic growth, inflation, income inequality, weak productivity and employment rates, whether existing or expected.

That is certainly valid but, sadly and worrisome, there is much more to the much higher levels of anger brewing than could seem be warranted by that. That goes also for the rest of the world. 

Sir, what is happening? Here is my own tweet-sized explanation of that.

“Shameless polarization and redistribution profiteers, sending out their messages of hate and envy through social media, at zero marginal cost, are exploiting our confirmation bias, namely the want or need to believe what we hear, up to the tilt. It will all end very badly.”

https://perkurowski.blogspot.com/2010/05/speakers-corner-speakers-have-moved-to.html

@PerKurowski

Are our productivity, real salary, unemployment, and GDP figures up to date?

John Authers writes, “If ever there was a good place to take a deep breath and gain context on our unnecessarily complex world, it would be Jackson Hole, Wyoming” “Powell avoids foreign complications in the winds of Wyoming” August 25.

In a recent post in Bank of England’s blog “bankunderground” I read: “With the rise of smartphones in particular, the amount of stimuli competing for our attention throughout the day has exploded... we are more distracted than ever as a result of the battle for our attention. One study, for example, finds that we are distracted nearly 50% of the time.”

So, one interesting way for central bankers to get an understanding of our ever more complex world would be to ask them: If you deliver the same at work as a decade ago, but now you spend 50% of your working hours consuming distractions, on your cell or similar, how much has your productivity, your real salary, your voluntary unemployment increased? And what about GDP?

PS. Sir, as you well know, before initiating the Jackson Hole proceedings, I would love for all central bankers there to assist a seminar on the meaning “conditional probabilities.” Had they known about it before imposing their risk weighted capital requirements for banks it would have saved the world from a lot of problems.

@PerKurowski

If output displacement hides productivity, so does input displacement.

Sir, Dr Peter Johnson, responding to Diane Coyle’s “Conventional measures pose the wrong productivity question” August 16, argues that “Shift in output definition [is] at the heart of the productivity puzzle” and concludes “We are not counting apples for apples”,August 20.

As one example of “output displacement” output Johnson writes that “A great deal of retail banking activity has been displaced to private individuals [as a result of internet technology] and is not included in the calculations of output or productivity.”

There is also the other side of that same mirror namely that which you could call input displacement. 

In a letter to you referring to that same article by Diane Coyle I mentioned a post by Dan Dixon, in Bank of England’s “bankunderground” blog, titled “Is the economy suffering from the crisis of attention?” 

It said, “With the rise of smartphones in particular, the amount of stimuli competing for our attention throughout the day has exploded... we are more distracted than ever as a result of the battle for our attention. One study, for example, finds that we are distracted nearly 50% of the time.”

Sir, if those interruptions were recorded for what they really are, reduced working hours and increased consumption of distractions, we would probably see a dramatic increase in productivity, in real salaries, in voluntary unemployment and in GDP.

In other words our current economic compasses might not be working properly, risking taking us in the wrong direction.

@PerKurowski

If it now takes researchers much more time to come up with ideas, how much of that is caused by their consumption of distractions?

Sir, Diane Coyle writes that current productivity data does not consider what’s achieved through outsourcing since GDP excludes all the intermediate links in the chain and the additional value is netted out. If included “economic output would look somewhat better than the current statistics suggest. “Conventional measures pose the wrong productivity question” August 16.

But when Coyle refers to “a recent paper a group of economists from Stanford University and the Massachusetts Institute of Technology…calculate that it now takes more than 20 times the number of researchers to generate the same economic growth as it did in the 1930s.” I would have to ask: Does that calculation take due consideration of the ever-growing time researchers spend, not working, but consuming distraction on the cell phones or laptops?

Some months ago, in Bank of England’s “bankunderground” blog, we read a post by Dan Nixon titled “Is the economy suffering from the crisis of attention?” It said, “With the rise of smartphones in particular, the amount of stimuli competing for our attention throughout the day has exploded... we are more distracted than ever as a result of the battle for our attention. One study, for example, finds that we are distracted nearly 50% of the time.”

If those distractioninterruptions were recorded for what they really are, we would probably see a dramatic increase in productivity, in real salaries, in voluntary unemployment and in GDP.

In other words our current economic compasses might not be working properly, risking taking us in the wrong direction.

@PerKurowski

If we want real productivity data, we need consider real working conditions

Sir, I refer to my former colleague at the World Bank Kurt Bayer’s letter of August 16, “Real productivity is an efficiency measure”. I fully agree with what he argues, though, unfortunately, lately, life has become more complicated, even for statisticians. 

Some months ago, in Bank of England’s “bankunderground” blog, we read a post by Dan Nixon titled “Is the economy suffering from the crisis of attention?”. It said, “With the rise of smartphones in particular, the amount of stimuli competing for our attention throughout the day has exploded... we are more distracted than ever as a result of the battle for our attention. One study, for example, finds that we are distracted nearly 50% of the time.”

And so these interruptions should have to be recorded for what they are, meaning a consumption of distractions during working hours. If so, we would perhaps see a dramatic increase in productivity, in real salaries, in voluntary unemployment and in GDP.

In other words our current economic compasses might not be working properly, risking taking us in the wrong direction.

@PerKurowski

We need to rethink productivity data, in light of so many “working hours” spent consuming distractions.

Sir, referencing Chris Giles’ and Gavin Jackson’s “Surge in low-value jobs magnifies UK productivity problem” of August 13, I believe that whenstating “increases in low-wage jobs in bars, social work and warehouses have served to hold back UK productivity growth” it hints at sort of causation that might not really be there.

I say so because we have entered a new era that requires redefining entirely the ways we measure productivity. 

Some months ago, in Bank of England’s “bankunderground” blog, we read a post by Dan Nixon titled “Is the economy suffering from the crisis of attention?”. It said, “With the rise of smartphones in particular, the amount of stimuli competing for our attention throughout the day has exploded... we are more distracted than ever as a result of the battle for our attention. One study, for example, finds that we are distracted nearly 50% of the time.”

Nixon, answering the question posed in the title wrote, “The most obvious place to look would be in productivity growth, which has been persistently weak across advanced economies over the past decade.”

But, what if instead of being recorded as distractions during working hours, these were to be recorded as a private consumption that reduces the effective working hours? Would that not increase GDP and reduce working hours, and thereby point instead to a dramatic increase in productivity?

In the same vein, would then not real-salaries, instead of stagnating, have been increasing a lot?

And what about our employment and unemployment data if the time used to consume distractions during working hours would not be counted as work? 

Sir, it behooves us to make certain how we measure the economy gets updated to reflect underlying realities. 

Perhaps then we are able to understand better the growing need for worthy and decent unemployments.

Perhaps then we are able to better understand the need for a Universal Basic Income, not as to allow some to stay in bed, but to allow everyone a better opportunity to reach up to whatever gainful employments might be left, like those “low-wage jobs” that it behooves us all, not to consider as “low value jobs”

@PerKurowski

Productivity, real salaries, employment rates, GDP should consider the increased consumption of distractions during work hours

Sir, Erik Brynjolfsson (and Andrew McAfee) writes: “If machine learning is already superhuman, why did we not see it in productivity statistics earlier? The answer is that its breakthroughs haven’t yet had time to deeply change how work gets done” “Machine learning will be the engine of global growth” July 27.

That is true, but we also need to realize that we have not done yet measured the effect of all the increased consumption of distractions during working hours.

In Bank of England’s “bankunderground" blog we recently read: “With the rise of smartphones in particular, the amount of stimuli competing for our attention throughout the day has exploded... we are more distracted than ever as a result of the battle for our attention. One study, for example, finds that we are distracted nearly 50% of the time.”

And on a recent visit to a major shop in the Washington area, thinking about it, I noticed that 8 out of the 11 attendants I saw were busy with some type of activity on their cellphones, and I seriously suspect they were not just checking inventories.

The impact of that on productivity, with less effective working time is being put into production, could be huge.

Also, going from for instance a 10% to a 50% distraction signifies de facto that full time or paid by the hour employee’s real salaries have increased fabulously.

And what about the real employment rate if we deduct the hours engaged in distractions? A statistical nightmare? Will we ever be able to compare apples with apples again?

And how should all these working hours consumed with distractions be considered in the GDP figures?

@PerKurowski

The UK needs its banks to get rid of equity minimizing financial engineers and call back savvy loan officers (perhaps some like George Banks)

Sir, Martin Wolf writes he now “rather suspect”, that “the BoE’s views on risk weights might be leading to an economically unproductive focus on property lending”. “Labour’s productivity policy is a work in progress” July 13.

Banks are allowed to leverage more with what’s perceived, decreed or concocted as safe, like with mortgages, loans to sovereigns and AAA rated securities, than with what’s perceived as risky, like with loans to small and medium enterprises and to entrepreneurs.

That means clearly that banks are allowed to earn higher expected risk-adjusted returns on equity with “the safe” than with “the risky”; without any consideration given to the purpose for which the financing is to be used. In essence, regulators have decreed that “the safe” are worthier borrowers than “the risky”.

And of course, since risk taking is the oxygen of any development that is doomed to negatively affect the productivity of the economy.

Sir, I’ve written hundreds of letters to Mr. Wolf about “imprudent risk-aversion” for over more than a decade, and so of course I am glad he has reached the stage of “rather suspecting” all this is true. 

Wolf here refers to a report prepared for the Labour party by Graham Turner of GFC Economics that as a solution mentions, “the establishment of a “Strategic Investment Board” to deliver the government’s industrial strategy, use of the Royal Bank of Scotland to deliver lending to small and medium businesses and creation of an “Applied Sciences Investment Board” to deliver public sector financing of research and development.”

How can I convince Wolf that long before any statist Hugo Chavez like ideas that he still considers “half-baked” are tried out, we need to get rid of the distortions produced by the risk-weighted capital requirements for banks.

As Martin Wolf mentions, it could start with someone “wondering why securing financial stability is the only official aim for bank lending”; perhaps adding for emphasis the why on earth, in all bank regulations, there is not a single word of the purpose for banks beyond that of being safe mattresses into which to stash away cash.

But we could also question for instance BoE’s Mark Carney and Andy Haldane, on why they believe that what is made innocous by being perceived as risky, is more dangerous to the bank system than what is perceived as safe.

PS. On “the City of London being a global entrepot with little interest in promoting productive investment in the UK” I can only remind you and Wolf that could precisely be one of the reasons for why George Banks decided to quit banking and go fly kites instead 

@PerKurowski

When analyzing labor markets, do not ignore the time being wasted/used consuming distractions.

Sir, (as usual) I read with much interest Sarah O’Connor’s article on “labour shortages being reported gloomily all over the developed world” “Labour scarcity helps heal workers’ deep financial scars” July 11.

I think she forgot to include in her analysis the fact that more and more time is used during working hours in distractions. On a recent visit to a major shop in the Washington area, 8 out of the 11 attendances I saw were busy with some type of activity on their i-phones, and I seriously suspect they were not just checking inventories.

Less hours effectively worked, should translate not only in labor shortages but also into higher real salaries. And I also frequently ask myself what would our economic data be telling if treated the distractions as consumption. Could productivity have been increasing fabulously without us noticing it?

@PerKurowski

In terms of a short-termism that harms the long run, few are as guilty as current bank regulators.

Sir, Jonathan Ford quote US academic Lynn Stout with “The pressure to keep share prices high drives public companies to adopt strategies that harm long-term returns: hollowing out their workforce; cutting back on product support and on research and development; taking on excessive risks and excessive leverage; selling vital assets and even engaging in wholesale fraud.” “Shareholder primacy lies at heart of modern governance problem” March 5.

Indeed, but I hold that low investments and poor productivity is also the result of regulators’ risk weighted capital requirements for banks based on ex ante perceived risks. These focuses on making the banks safe today, at the price of making it all worse off tomorrow, ex post. How? Because they dangerously push banks to overpopulate, against especially little capital, those safe havens that have always been the main threats to our banking systems; and because they keep banks from exploring those risky bays, those with entrepreneurs and SMEs, those that could give us the growth and the jobs of tomorrow.

@PerKurowski

Universal Basic Income seems to be the most neutral and efficient tool to handle the unknown upheavals the use of artificial intelligence and robots will bring.

Sir, Rana Foroohar writes: “A McKinsey Global Institute report out on Wednesday shows that, while digitalisation has the potential to boost productivity and growth, it may also hold back demand if it compresses labour’s share of income and increases inequality.” “Why workers need a ‘digital New Deal’” February 19.

That sure seems to make the case for a Universal Basic Income, a Social Dividend, both from a social fairness angle and from the perspective of market efficiency.

To preempt that really unknown challenge at hand, Foroohar proposes something she names “the 25 percent solution” based on how Germany tackled an entirely different problem, the financial crisis. What it entails makes me suspect it could risk reducing the growth and productivity that could be achieved, and waste so much of the resources used to manage the consequences, so that only 25 percent, or less, of the potential benefits of having artificial intelligence and robots working for us would be obtained.

I worry sufficiently about a possible new Chinese curse of “May your grandchildren live with 3rd class robots and dumb artificial intelligence”; to also have to add “May your grandchildren have to serve the huge debt derived from technocrats defending your generation from artificial intelligence and robots.

Sir, I had more than enough of besserwissers trying to defend us and when doing so causing much more harm. Like when regulators, full of hubris, promised “We will make your bank system safer with our risk weighted capital requirements for banks”.

http://myubi.blogspot.ca/2017/01/my-universal-basic-income.html

@PerKurowski

What if workplace distractions were considered part of consumption instead of part production?

Sir, Tim Harford, who has blocked me on Twitter writes: “Bank of England’s unofficial blog…compared plunging productivity with the soaring shipments of smartphones. Typical productivity growth in advanced economies had hovered steadily around 1 per cent a year for several decades, but has on average been negative since 2007. That was the year the iPhone started to ship.” “Computers are making generalists of us all”, December 6.

That iPhone and many of its close or distant cousins, cause a lot of distractions. If that time distracted was classified not as time of production but as time of consumption, and outputs remain fairly the same, would that not point at much higher productivity and much higher real salaries?

https://teawithft.blogspot.com/2017/11/what-does-going-from-10-to-50-level-of.html

https://teawithft.blogspot.com/2017/12/the-distraction-factor-forces-us-to.html

PS. Harford writes here also a lot about Power Point presentations. Here my long ago take on it

@PerKurowski

What does going from a 10% to a 50% level of distraction signify for full-time employees’ real salaries?

Sir, Sarah O’Connor writes “Males in well-paid full-time employment, earning 2.5 times the median wage, are now working slightly longer hours on average than two decades ago, according to the Resolution Foundation, a think-tank.” “Robots will drive us to rethink the way we distribute work” November 29.

In Bank of England’s “bankunderground" blog we recently read: “With the rise of smartphones in particular, the amount of stimuli competing for our attention throughout the day has exploded... we are more distracted than ever as a result of the battle for our attention. One study, for example, finds that we are distracted nearly 50% of the time.”

So if 50% of the time is now spend being distracted, and since those not employed full time are not equally remunerated for distractions, that of “earning 2.5 times the median wage”, could de facto be a serious understatement.

Sir, just think about what going from for instance a 10% to a 50% distraction signifies to full time employees’ real salaries. Fabulous increases!

PS. And what is its impact on productivity in terms that less effective working time is being put into production?

PS. Or what would the real employment rate be if we deduct the hours engaged in distractions? A statistical nightmare? Will we ever be able to compare apples with apples again?

PS. And how should all these working hours consumed with distractions be considered in GDP figures?

PS. Robots will not only drive us to rethink the way we distribute work. It also forces us to think about how to create decent and worthy unemployments.

@PerKurowski

When you hold back banks from financing the riskier future, the pace of disruption and of productivity growth, will both slow.

Sir, I would like to make two brief comments with respect to Tim Harford’s “Disruption sets a less frenetic pace of change” of April 15.

The first is that the ownership of houses as well as the state of the housing market, influences on mobility. When you own a home but your equity in it has disappeared all things get to be more complicated.

The second is that though he mentions Tyler Cowen’s new book The Complacent Class, [which] argues that America has become less adventurous in many ways… he still does not want to understand that the risk weighted capital requirements for banks, more perceived risk more capital – less risk less capital, de facto orders less adventures and much more complacency.

http://subprimeregulations.blogspot.com/2017/03/banks-regulators-and-sovereigns.html

@PerKurowski

More than from corporate governance failures Britain, and the Western World, suffer a hubristic regulatory failure.

Sir, Martin Wolf, on the issue of: “why [UK] productivity growth is so pervasively low” writes: “One reason could be the exceptionally weak investment, by international standards. This would be another corporate governance failure. Rectifying this disaster is the UK’s most important policy challenge, far more so than Brexit. The government should finance a high-level effort aimed at working out what has gone wrong, why and what (if anything) to do about it. The country’s very future is at stake.” “Britain’s dismal productivity is its biggest policy challenge” April 7.

What corporate governance failure? Most of the responsibility for weak productivity growth can be traced directly to the risk–weighted capital requirements for banks concocted by Andy Haldane and his regulatory buddies at the Basel Committee for Banking Supervision.

Anyone who has walked on main-street and seen first hand how difficult it has always been for “risky” SMEs and entrepreneurs, without bankable collateral, to access bank credit, should have understood that to burden these even more by the fact they would also generate higher capital requirements for the banks than what “the safe” borrowers do, would affect productivity and economic growth.

Getting rid of these regulations that have effectively hindered millions of SMEs and entrepreneurs to access bank loan opportunities they would otherwise have been able to access, must of curse be the number one priority, not only in Britain but in the whole western world.

There will be much written in the future about how on earth regulators could come up with such daft regulations and how little the so much informed and so much connected world, questioned these.

On April 3, in FT, Anjana Ahuja, in reference to Robert Hare’s 1993 “Without Conscience: The Disturbing World of the Psychopaths Among Us,” wrote: “Uncertainty is unsettling and certainty is alluring. Beware anyone who offers the latter with charisma, especially at this jittery juncture. Arm yourself against the charlatans…not only criminal psychopaths but the white-collar kind — who overstate their abilities, denigrate subordinates, have a tenuous grip on truth and seek greater power with shrinking oversight.”

That convinced me that we should subject those technocrats taking decisions on such vital aspects as bank regulations, to a full psychological assessment before we allow them to proceed. We do mandate such tests for airplane pilots, even if they are engaged in much less dangerous activities for the world.

Frankly we can’t afford the luxury of having regulators so dumb that they set the capital banks should have in order to meet unexpected events, like ex ante perceived as very safe borrowers turning out ex post being very risky, based on the expected credit risks bankers already clear for.

And its not like I have not said it before. Here for instance on Martin Wolf's Economist Forum in 2009

@PerKurowski

Who sold IMF the fake idea that risk weighted capital requirements for banks do not distort the allocation of credit?

Sir, Shawn Donnan, referring to a IMF paper recently released by Christine Lagarde, “Gone with the Headwinds: Global Productivity”, writes that IMF economists warn: “The world’s economy is caught in a productivity trap thanks to an abrupt slowdown caused by the 2008 global financial crisis, which will yield more social turmoil if it is not addressed hold that” “IMF raises fear of slowing productivity” April 4.

Bank assets, based on how they are perceived ex ante, can be divided into safe and risky assets. The “safe”, by definition, currently include sovereigns and corporates with good credit ratings, and residential mortgages. The “risky” include what is unrated or what does not possess very good ratings… like loans to SMEs and entrepreneurs. It is also clear that she safe includes more of what is known; meaning what’s in the past or present, and the risky more of what is unknown, meaning what lies in the future.

Then suppose regulators had transparently told the banks: “We hate it so much when you take risks so that, from now on, if you finance something that is perceived as safe and stay away from what is perceived as risky, we will reward you by helping you to make you much higher risk adjusted returns on equity”.

In such a scenario, could it not be reasonably expected that IMF would be identifying regulatory risk aversion as something that could be slowing productivity? I mean, as John A Shedd said: “A ship in harbor is safe, but that is not what ships are for"

But, rewarding the banks for going for the safe, and staying away from the risky, is exactly what the current risk-weighted capital requirements for banks does.

And the IMF, even though here the report mentions: “Growing misallocation during the pre-global- financial-crisis financial boom [and] The global financial crisis might have worsened capital allocation further by impeding the growth of financially constrained firms relative to their less constrained counterparts.” says nothing about distorting bank regulations having something to do with this misallocation; an only produces second-degree explanations such as “banks may have “evergreened” loans to weak firms to delay loan-loss recognition and the need to raise capital”. How come?

April 3, in FT, Anjana Ahuja in reference to Robert Hare’s 1993 “Without Conscience: The Disturbing World of the Psychopaths Among Us,” wrote the following:

“Uncertainty is unsettling and certainty is alluring. Beware anyone who offers the latter with charisma, especially at this jittery juncture. Arm yourself against the charlatans…not only criminal psychopaths but the white-collar kind — who overstate their abilities, denigrate subordinates, have a tenuous grip on truth and seek greater power with shrinking oversight.”

Could it really be that one or more of these spellbinding salesmen of certainty illusions, technocratic besserwissers, managed to enthrall and blind the whole IMF? If so, Mme Lagarde owes herself and the IMF to find who they were… and to put a stop to it.

May I suggest she starts doing so by sending around to all those in the IMF that have had anything to do with bank regulations, some of those questions that, without any luck, I have tried to get answered, many times even in the IMF. Here’s the link: http://subprimeregulations.blogspot.com/2016/12/must-one-go-on-hunger-strike-to-have.html

But perhaps IMF already knows who those “charlatans” were, and just want to spare some members of their mutual admiration club some very deep embarrassments. If so then IMF is not fulfilling its responsibilities, as it should.

Too much is at stake! More than ever the world need to develop the capability of filtering out any fake experts, no matter how nice they are and no matter how important the networks they belong to.

PS. Twice I have had the opportunity to ask Mme Lagarde on this subject, and twice she kindly answered me, but nothing seems to have come out of it 

http://subprimeregulations.blogspot.com/2011/09/my-question-at-civil-society-townhall.html

http://subprimeregulations.blogspot.com/2013/10/my-question-for-umpteenth-time-to-world.html

PS. In December 2016, during the IMF’s Annual Research Conference, Olivier Blanchard also agreed with me there were needs to research how these capital requirements distort.

http://subprimeregulations.blogspot.com/2016/11/olivier-blanchard-agrees-there-is-need.html

@PerKurowski

Why are experts like Martin Wolf so silent on the immoral and utterly stupid facets of current bank regulations?

Sir, Martin Wolf questions the UK government’s “moral choices for a country forced to share out losses imposed by a massive financial crisis and weak subsequent growth [because] the government has decided to give greater priority to the old than to the young, to pensioners than families with children and to the better off than to the relatively worse off” “May’s policies make a mockery of her rhetoric” February 10.

But, when I question the intelligence and the morality of current bank regulations, Wolf ignores it. So Sir, here we go again, for the umpteenth time!

The risk weighted capital requirements for banks, caused a massive financial crisis by giving too large incentives for banks to create excessive bank exposures to what was supposed to be safe, like AAA rated securities and Greece; and with incentives that hinder banks from taking sufficient risks on the future, like lending to “risky” SMEs and entrepreneurs, causes weak growth and lack of increased productivity.

That clearly immorally favors the well-off over those poor wanting and needing credit opportunities; just as it immorally favors banks financing the safer past and present, than the riskier future the young need to be financed.

It is also I would say almost immorally stupid; since major bank crises always result from unexpected events, criminal behavior or excessive exposures to what was erroneously perceived or decreed as safe, and never ever from excessive exposures to something perceived as risky when placed on banks’ balance sheets.

Basel I assigned a risk weight of 0% to the Sovereign and one of 100% to us We the People; and it would seem Wolf is unable to grasp the runaway statism of that.

Basel II assigned a risk weight of 20% to what was AAA to AA rated and one of 150% to what is below BB-; and it would seem Wolf is unable to grasp the lunacy of that.

@PerKurowski

When will the competitiveness of your robots be more important to your real economy than that of your human workers?

Sir, if worker productivity had remained as 1950 levels, how many humans workers would have been needed in the world to deliver the 2016 manufacturing production, compared to those 43m who, according to Martin Wolf, were worldwide employed in 1950? I have no idea but definitely many times more than those 145m Wolf indicates as currently employed in 2016. “Tough talk on trade will not bring jobs back” February 1.

Set in this perspective “The main explanation for the longterm decline in the share of manufacturing employment in the US (and other high-income economies)” is not so much what Wolf states “the rise in employment elsewhere”, but the increased productivity of which Wolf also writes.

So, what do we want, the higher productivity that generates “sustained improvement in living standards”, or some lower productivity that could generate more jobs for humans?

Wolf, like most of us, perhaps with exception of those who might still dream of some 60s’ hippie-solutions, rightly prefers the first; and therefore his concern with that in the “US manufacturing employment rose a little… as a result… of productivity’s recent stagnation: in manufacturing, output per hour rose only 1 per cent between the first quarters of 2012 and 2016.”

The crudest implication of this is: do we need humans more capable to work or better robots? That question naturally leads to: will the competitiveness of the robots they possess, define the strength of future human groupings?

Sir, for me these are much more fundamental questions than that of: how can we save jobs for [our] manufacturer workers from being taken away by [their] workers?

In 2012 I wrote an Op-Ed titled “We need decent and worthy unemployments”. Perhaps within the application of a Universal Basic Income scheme, lies part of the solution to the enormous societal challenges automation causes.

But, no matter what we do, let us get rid of those dangerous distortions of the allocation of bank credit, because, whatever the future needs, how on earth are you suppose to give it to the future, if one is not willing for banks to take risks. Again, as a minimum minimorum, we must save ourselves from regulators so dumb they assign a 20% risk weight to that so dangerous to the bank system as the AAA rated, while hitting the innocuous below BB- rated, with a 150% risk weight.

Sir, I want my grandchildren to be able to develop themselves the most they can, as humans. That will require them being surrounded by content and happily unemployed humans, as well as possessing savagely efficient (and obedient) robots.

PS. The absence of statistical information on how much robots and other automation have substituted for human salaries and jobs, is baffling, especially in these data days. No wonder we might be in sore need of some artificial intelligence assistance, like from for instance IBM’s Watson.

@PerKurowski

Rising productivity cannot result when regulatory risk aversion is distorting the allocation of bank credit

Sir, Martin Wolf writes: “UK’s future income will depend on rising output per hour” “The productivity challenge to the British economy” January 27.

To be able to increase productivity is not a God given right. In general it requires a lot of risk-taking, like loans to SMEs, entrepreneurs and start-ups. The risk weighted capital requirements for banks represents a big effective wall against such risk taking. But on that Wolf has steadfastly kept mum.

PS. I dreamt last night that I had finally gotten an answer from the regulators on my questions… but then I woke up L

@PerKurowski